Lott expects to whip GOP against Blackstone bill

Minority Whip Trent Lott (R-Miss.) said he would “probably” whip Senate Republicans against the so-called Blackstone bill that would raise taxes on publicly traded hedge fund and private equity firms.
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“It depends on what other thing it is attached to, but I don’t think we ought to do that,” he told The Hill.

The Mississippi Republican said there were “legitimate questions” surrounding the taxation of hedge fund and private equity firms that go public, but he argued that raising taxes on them would be counterproductive.

“I think probably we have other things we should be working on,” he said.

 Some lobbyists anticipate the legislation will move as soon as this week, most likely tacked on to other legislation pending before the Senate Finance Committee, such as the tax title to the farm bill, the tax credit for active-duty members of the military or a package of administrative reforms known as the “good government” legislation.

Yet others believe it is more likely to move as part of legislation to patch the Alternative Minimum Tax (AMT) or be attached to a package of popular tax-break extensions.

“The reality is it could go anywhere,” one lobbyist said. “Every bill is a possible train.”

There is a growing sense among lobbyists and staffers that, unlike a broader proposal to raise taxes on the “carried interest” earned by managers of private equity and hedge funds, the narrowly tailored tax increase on a handful of publicly traded partnerships (PTPs) would be hard to stop.

 “Once it’s on a vehicle that’s moving, I just don’t see it coming off,” a Senate tax aide said.

The bill would tax publicly traded private equity and hedge fund firms at the corporate tax rate of 35 percent rather than the 15 percent capital-gains rate that applies to investors in partnerships.

The legislation was quickly dubbed the Blackstone bill after Sens. Max BaucusMax Sieben BaucusBaucus backing Biden's 2020 bid Bottom line Overnight Defense: McCain honored in Capitol ceremony | Mattis extends border deployment | Trump to embark on four-country trip after midterms MORE (D-Mont.) and Chuck GrassleyCharles (Chuck) Ernest GrassleyLobbying blitz yields wins for airlines, corporations, banks, unions Chances for drug pricing, surprise billing action fade until November Stimulus talks to miss McConnell's Monday deadline MORE (R-Iowa), chairman and ranking member of Finance, introduced it about a week before private equity giant Blackstone became the first private equity firm to hold an initial public offering. Rep. Peter WelchPeter Francis WelchDems unlikely to subpoena Bolton Democratic candidates gear up for a dramatic Super Tuesday A disaster for diplomacy and the Zionist dream MORE (D-Vt.) introduced a similar bill in the House shortly thereafter.

In a Senate Finance Committee hearing this summer, several panel members aired concerns with the legislation, but none has emerged as a firm ally of the hedge fund and private equity industries on the issue.

Sen. Jon Kyl (R-Ariz.), one of the most vocal anti-tax crusaders, said he has “not decided” on his stance on the bill.

Lott’s comments notwithstanding, one lobbyist doubted that many Republicans would vigorously oppose the tax increase because it will hit so few firms in an industry that has drawn bad publicity and has a record of giving to Democrats. The lobbyist said his view was reflected in Lott’s qualified response when asked about whipping against the bill: “It was not the answer the private equity lobbyists would hope for.”

Lobbyists have been disappointed that Charles SchumerCharles (Chuck) Ellis SchumerTexas man arrested for allegedly threatening Democrats over coronavirus bill Pelosi not invited by Trump to White House coronavirus relief bill's signing COVID-19, Bill Barr and the American authoritarian tradition MORE (N.Y.), the third-ranking Senate Democrat, has not been a more forceful champion of the hedge fund and private equity industries, many of which are based in New York.

According to one lobbyist, Schumer has told the hedge fund and private equity industries to find him three other Democrats to oppose the bill before he will fight it. Schumer’s spokesman did not respond to a request for comment by press time.

Sen. John KerryJohn Forbes KerryLongtime Biden adviser posthumously tests positive for coronavirus The Hill's 12:30 Report: House to vote on .2T stimulus after mad dash to Washington Conservative lawmakers tell Trump to 'back off' attacks on GOP colleague MORE (D-Mass.), who has voiced doubts about the tax change, said he was working with Baucus to resolve some issues with the bill. “I’m concerned about the transition period, among other things,” he said.

The Baucus-Grassley legislation grants firms that filed to go public by June 14 of this year a five-year period before they are taxed as corporations. Some members of the Senate Finance Committee are pushing for a longer 10-year period, while others favor no transition at all, such as in the House legislation, according to a Senate tax aide.

The hedge fund and private equity industries are trying to persuade Finance Committee members to opt for legislation to study the issue rather than change the law.

If that fails, lobbyists will push for a postponement of the effective date to allow more funds to go public under the more favorable partnership tax structure for the duration of the transition period. They also hope to lengthen the transition to 10 years.